After good Q2, second half may be better for GAIL

Firm earnings outlook should allay concerns on higher-priced new contracts

The Street’s confidence on GAIL should firm up further following its strong all-round performance in the September quarter (Q2) and a healthy outlook. GAIL has continued to see improvement in profitability over the past year, which has pushed up its share price. Though concerns on higher-priced (take or pay) US LNG contracts, commencing this month, restricted gains in the counter, the domestic regulator’s proposal on implementation of unified tariff (rates) has boosted sentiment from end-September. If implemented, it can significantly improve GAIL’s earnings visibility. Petronet’s renegotiation of Australian contract also raises hopes of GAIL successfully re-negotiating its high-priced US contracts.